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10/11/2022 - Economy

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November 10, 2022

As the use of cash has risen alongside spike in digital payments, more needs to be done to promote Unified Payment Interface. Discuss (200 Words)

Refer - Business Line

Enrich the answer from other sources, if the question demands.

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IAS Parliament 2 years

KEY POINTS

·        Policymakers trying to transition India to a less-cash economy have been confounded by a peculiar phenomenon  currency in circulation growing right alongside rising digital adoption.

·        With the mushrooming of mobile wallets, QR-based apps and the Unified Payments Interface (UPI), the volume of digital transactions leapfrogged, as per RBI data.

·        But CIC (currency in circulation) as a proportion of GDP has been rising too. After hovering at 11-12 per cent until FY20, it hit 14 per cent in FY21 and remained at 13 per cent in FY22.

·        The lower need for cash can mainly be traced to the widespread adoption of UPI.

·        As SBI notes, should UPI manage to materially reduce the need for the public to deal in cash, this could usher in many advantages to the economy.

·        Substitution of anonymous cash payments with digital ones also allows for greater traceability of transactions for the taxman looking to widen the tax base.

·        Should the demand for paper currency diminish, banks would save on the logistics costs involved in safely storing and transporting paper currency and regularly refilling their ATMs.

·        But despite affluent consumers embracing them in a big way, digital payments are still far from ubiquitous.

·        Policymakers may need to address two stumbling blocks to further the reach of digital payments.

·        Banks and other ecosystem participants also need to make adequate investments in backend infrastructure to keep up with burgeoning transaction volumes.

·        On this score, it is imperative that RBI and the Centre quickly arrive at an understanding on the issue of charging for UPI services.

 

Sivasurya 2 years

Please review

IAS Parliament 2 years

Try to include data to support your answer, advantage of UPI is not needed. Keep Writing.

K. V. A 2 years

Pls review

IAS Parliament 2 years

Good attempt. Keep Writing.

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